[CULTURAL DIMENSIONS]Dust off the dismal realityIn the spirit of the “Democracy Declarations” of the 1980s, professors from around the country are joining forces to sign an “Economy Declaration.” Economics and business administration professors issued the declaration in January, but professors from other fields have recently added their signatures, pushing the total over 1,000 on Feb. 14. The “Economy Declaration” states that the economy is in crisis and calls on the Roh Moo-hyun administration to focus its efforts on growth-oriented economic policy.
Viewed in light of the pro-Roh-anti-Roh divide in Korean politics, the “Economy Declaration” is an anti-Roh document. It accuses the president of creating political instability that undermines economic confidence that depresses economic activity. By calling on the president to address economic policy, the declaration is asking him to return to the economy-first paradigm of presidents past.
The declaration comes at an odd time because most recent economic indicators suggest that a recovery is taking hold. Economic growth is increasing and may reach 6-7 percent this year, exports are up and the trade surplus is strong. Growth in new jobs remains slow, but is set to improve as the recovery expands. The huge mountain of consumer debt, however, continues to weigh heavily on consumer spending.
With plentiful good news around, what are the professors worried about? Are they simply anti-Roh or are they addressing deep-seated problems?
The timing of the “Economy Declaration” is obviously political, but it is less anti-Roh than it may seem. The recent wave of corruption scandals has engulfed all major political groups, but the opposition parties have become irrational and desperate. Instead of providing stable leadership to counter the instability of the president, they have responded by offer yet more instability. Threats of impeachment and more recently of boycotts of the coming National Assembly election have stirred worries about a leadership crisis not seen since the massive pro-democracy demonstrations in 1987.
Far more important, however, is the question of the economy. The “Economy Declaration” is, at heart, a call for a policy with an argument. The drift and instability in current policy comes from the lack of a central argument that runs through all related policies. What should be the central argument of the Korean economic policy?
There can be only one answer: national competitiveness. Economic policies should focus on improving the nation’s competitiveness as an exporter and as a place to do business. All other priorities, including politically popular ideas such as high growth and wealth redistribution must come second. As a small country with few natural resources and a dense and aging population, Korea needs a long-term strategy for improving national competitiveness. Short-term growth strategies will run out of steam as the population ages, while redistribution strategies risk creating the sort of myopic complacency that has caused once-successful nations to decline.
Trends in the global economy are pressing hard on Korea. The rise of China has eviscerated the low-tech manufacturing economy and as China grows, it will take more business away from Korea. The rise of India as a new center for growth in Asia will only accelerate this trend. To carve a niche in the global economy, Korea must make the final jump to becoming a knowledge and technology creator.
To become a knowledge and technology creator, Korea needs talented human resources, particularly in the sciences and engineering. In 1999, Korea ranked fifth in the world in the number of undergraduate degrees given annually in engineering, but China and Japan ranked first and second. In terms of percentage of all undergraduate degrees given, China outpaced all major nations at 44 percent. Only 5 percent of degrees are in engineering, but the country attracts talented engineers from overseas. The drop in popularity of engineering and the steady brain drain should be cause for alarm.
Talented human resources alone, however, do not ensure competitiveness, as the United States found out in the 1970s and Japan discovered in the 1990s. To be competitive, a nation must create a business environment that supports innovation, rewards success and punishes failure. Talented human resources drive innovation, but government policy has a direct impact on reward for success and punishment for failure through the tax and legal structures that it creates. The economic crisis of 1997 forced a positive sea change in the business environment. The recent lurch toward egalitarianism, as evident in the “we” in the name of the Uri Party, could undermine the progress since the 1997 crisis by pushing people and money overseas to more attractive places to do business.
The economists who signed the “Economy Declaration” know that economics is a dismal science (if it is a science at all) about money and power, but they also know that successful economies do great things for their people. This is why a central argument for national competitiveness is so important to Korea.
* The writer is an associate professor at Kyoto University in Japan.
by Robert J. Fouser
with the Korea JoongAng Daily
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